Buying a Property at Auction: Is It Really a Good Deal?
Buying a Property at Auction: Is It Really a Good Deal?
There is something exciting about the idea of buying a property at auction. You might find a home that needs some attention, a renovation project or an opportunity that you wouldn't normally come across through a traditional estate agent.
Auction properties can sometimes attract buyers looking for something different, but it is important to understand exactly what you're getting into before placing a bid.
Buying at auction is not quite the same as making an offer on a property through an estate agent.
Why do properties go to auction?
There are various reasons a property might be sold at auction.
It could be a house requiring significant refurbishment, a property being sold as part of an estate, an investment opportunity or a home where the seller wants a defined sale process.
Some properties may have unusual circumstances, so it is important not to assume that every auction listing represents a bargain.
The asking guide or starting bid is not necessarily an indication of the final amount the property will achieve.
What is a guide price?
A guide price is an indication of the price range the auctioneer expects the property to attract.
It is not a guaranteed purchase price, and competitive bidding may take the final amount considerably higher.
Before getting carried away with a low guide price, research comparable properties and work out what the home is realistically worth to you.
Remember to include the cost of any repairs, refurbishment, professional advice and additional fees.
Read the legal pack carefully
One of the most important parts of buying at auction is reviewing the legal pack before bidding.
This usually contains important information about the property and the terms of sale. It may include title documents, searches, special conditions and other relevant paperwork.
You should arrange for a solicitor to review the legal pack before committing to a bid.
There may be conditions or costs that are not immediately obvious from the property listing.
What happens when you win?
This is where auction purchases can differ significantly from a traditional property purchase.
Under a traditional unconditional auction, the successful bidder will generally exchange contracts immediately when the hammer falls. A deposit is normally payable at that point, and completion takes place within the period specified in the auction conditions.
The exact arrangements can vary, particularly where a conditional or modern method of auction is used.
You should never assume that you can simply change your mind after winning.
Get your finances organised first
Before bidding, make sure you understand how you will fund the purchase.
If you're using a mortgage, speak to your lender or broker beforehand. Some properties may not meet a lender's requirements, particularly if they need substantial work.
You should also budget for the deposit, legal costs, auction fees and any other charges specified in the conditions of sale.
If the property needs renovating, obtain realistic estimates rather than relying on guesswork.
Is buying at auction right for you?
Auction purchases can suit experienced buyers and those who have carried out thorough research. However, they may not be the best route for someone who needs plenty of time to arrange finance or investigate the property.
The most important rule is simple: understand the property, the legal terms and your maximum budget before you bid.
Looking for a property in East Bristol?
Whether you're considering an auction purchase or a more traditional sale, Holbrook Moran can help you explore the local property market. Speak to our team about your requirements.
